1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ) ISCR Case No. 17-00467 ) Applicant for Security Clearance ) Appearances For Government: Nicole A. Smith, Esq., Department Counsel For Applicant: Pro Se ______________ Decision ______________ MURPHY, Braden M., Administrative Judge: Applicant mitigated the financial considerations security concerns. Eligibility for access to classified information is granted. Statement of the Case On March 23, 2017, the Department of Defense (DOD) issued a Statement of Reasons (SOR) to Applicant detailing security concerns under Guideline F, financial considerations. The action was taken under Executive Order (Exec. Ord.) 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended; DOD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive); and the adjudicative guidelines implemented by the DOD on September 1, 2006. On December 10, 2016, the Director of National Intelligence (DNI) issued Security Executive Agent Directive 4, National Security Adjudicative Guidelines (AG). The AGs became effective on June 8, 2017, for all adjudicative decisions on or after 2 that date, including this one.1 Any changes resulting from the implementation of the new AGs did not affect my decision in this case. Applicant answered the SOR on April 13, 2017, and requested a hearing. The case was assigned to me on May 12, 2017. The hearing convened on July 31, 2017, as scheduled. At the hearing, Department Counsel offered documents marked as Government Exhibits (GE) 1 through 5. GE 1, GE 3, GE 4, and GE 5 were admitted into evidence without objection. GE 2 was not admitted.2 Applicant testified and offered two documents, which were marked as Applicant’s Exhibits (AE) A and AE B and admitted without objection.3 I held the record open until August 28, 2017, to enable Applicant the opportunity to submit additional documents.4 Applicant timely submitted 24 pages of documents, marked as AE C through AE N, and AE O (a seven-page fax), all of which were admitted without objection. The record closed on August 28, 2017. DOHA received the transcript (Tr.) on August 8, 2017. Findings of Fact Applicant admitted SOR ¶¶ 1.a, 1.d, 1.e, and 1.f. He denied SOR ¶¶ 1.b and 1.c. His admissions and other comments are incorporated into the findings of fact. After a thorough and careful review of the pleadings and exhibits submitted, I make the following findings of fact. Applicant is 57 years old. He is married and has one adult daughter. They live together, along with his infant granddaughter. He has worked in a naval shipyard as a defense industry employee for 37 years, since 1980. He currently holds a security clearance, most recently granted in 2003. Applicant submitted a security clearance application (SCA) in March 2015. He disclosed several delinquent debts, including credit cards and medical debts. (Tr. 12-14, 32, 84-87; GE 1) The SOR allegations concern a discharged bankruptcy (¶ 1.a); two small medical debts (¶¶ 1.b, 1.c), one year of unfiled federal tax returns (¶ 1.d), and some unspecified federal and state tax debt (¶¶ 1.e, 1.f) 1 At the hearing, Applicant confirmed that he received a copy of the new AGs (Tr. 7-9) 2 GE 2 is the unauthenticated summary of Applicant’s June 8, 2015 background interview, part of his personnel background report of investigation (ROI). Under ¶ E3.1.20 of the Directive, an ROI is admissible only through an authenticating witness. Applicant did not sufficiently authenticate GE 2, so it was not admitted. (Tr. 20-24) 3 AE A is an updated answer to the SOR, prepared by Applicant the weekend before the hearing. (Tr. 28- 29) At the hearing, I took administrative notice of three original compact discs Applicant produced, and a book he wrote. (Tr. 42-45; AE B) He later provided copies of the CD covers and the book cover. (AE N) 4 Tr. 123; Hearing Exhibit II. The Government’s discovery letter is Hearing Exhibit I. 3 Applicant’s financial issues stem from a variety of circumstances. In addition to his full-time job at the shipyard, Applicant has for many years been a singer/performer and music producer. He provided ledger excerpts from that business from the 1980s and 1990s, as well as performance flyers, brochures, and CDs from 25 years ago up to the present day.5 In about 2007, Applicant also wrote and produced a novel, which he hoped to publish profitably. The novel was essentially his version of a sequel to a well-known Hollywood movie. His publishing attempts were unsuccessful, because he was notified by industry representatives that his book probably violated copyright laws. Applicant testified that he expected that a book deal would “solve everything,” but he took a “big hit” financially when a book deal did not materialize. (Tr. 40-41, 52, 90-92; AE B; AE N) Applicant then began investing in the stock market. He did so on the advice of friends, rather than on the basis of professional advice, and he lost several thousand dollars in the stock market between 2007 and 2010. (Tr. 56-58, 92) In 2010, Applicant’s mother passed away. He used savings to pay for her funeral. In 2012, Applicant was also diagnosed with prostate cancer. This led to $8,000 in out- of-pocket medical expenses. (Tr. 36, 108-109) In about 2012-2013, Applicant pursued debt consolidation in an attempt to resolve his mounting credit card bills. He paid a debt consolidation company $500 a month. Through these efforts, he settled two of his past-due accounts, both auto loans. A third account, a credit card company, would not settle and instead began to garnish his wages in 2014. Over three months, the company garnished 40% of his wages. As a result, Applicant was not able to resolve his remaining debts through debt consolidation, and he fell further behind financially. (Tr. 53-56, 59-62, 94; GE 1) Applicant then made several withdrawals from his 401k plan in 2013-2014 in an attempt to pay his debts. This led to unexpected state and federal tax debt for those tax years. (SOR ¶¶ 1.e and 1.f) (Tr. 33, 63, 101-102) In September 2015, Applicant filed Chapter 7 bankruptcy. He declared $178,374 in liabilities. This included $84,503 in secured claims (his mortgage, a home equity loan, and a vehicle) and $83,765 in unsecured claims. The unsecured debts included credit card expenses related to his music production business, and other debts. Applicant also disclosed that he owed federal taxes for tax years 2013 ($4,100) and 2014 ($4,800), as well as $1,080 in state taxes for tax year 2014 (SOR ¶¶ 1.e, 1.f) (Tr. 49, 63; GE 5) 5 AE B, AE I, AE L – AE O. The expense ledgers Applicant provided are incomplete, largely illegible, and many years old, so I have given them little weight. (AE J, AE K) 4 The Chapter 7 bankruptcy was initially discharged in January 2016. In June 2016, Applicant requested that the proceeding be re-opened to account for the distribution of the garnished funds. The bankruptcy trustee submitted his final report in March 2017. (Tr. 66, 96-99; GE 5; AE D) SOR ¶¶ 1.b ($96) and 1.c ($31) are two medical debts that Applicant denied. They are listed on his February 2017 credit report. (GE 4) Applicant researched the debts with his insurance company, but could not verify them. (Tr. 72-73) He paid his tax debts (SOR ¶¶ 1.e and 1.f) in May 2017, so they are resolved. (Tr. 77; AE E, AE F). SOR ¶ 1.d concerns Applicant’s unfiled 2015 federal tax return. Applicant testified that he has used the same accounting/tax preparation firm for several years. He thought his 2015 tax returns had been filed but learned during the clearance application process that they had not been. Though he did not submit corroborating documentation, Applicant testified that these returns have now been filed, through his accountant, along with his 2016 returns. (Tr. 33, 73-75; 105-108). Applicant testified that his finances began improving after the bankruptcy was discharged. He now rents his home, instead of paying a mortgage. He now has catastrophic healthcare insurance through his employer so he expects fewer out-of- pocket medical expenses in the future. He testified that he is replenishing his 401k by $200 a month, and he states the account is valued at $100,000. Applicant makes $31- an-hour, and he earns about $4,000 a month. His wife works in home care, earning about $600 a month. Applicant recently purchased a nearby timeshare for $192 a month. He stated that he hopes to use it to improve his credit. (Tr. 33, 36, 50, 64-72, 108; AE G) Applicant concluded by stating that he has learned his lesson and will not “put all [his] eggs in one basket” so he does not find himself in financial difficulties again. (Tr. 118-120) Policies It is well established that no one has a right to a security clearance.6 As the Supreme Court noted in Department of the Navy v. Egan, “the clearly consistent standard indicates that security determinations should err, if they must, on the side of denials.”7 The AGs are not inflexible rules of law. Instead, recognizing the complexities of human behavior, administrative judges apply the guidelines in conjunction with the factors listed in the adjudicative process. The administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. According to AG ¶ 2(c), the entire process is a conscientious scrutiny of a number of variables known as 6 Department of Navy v. Egan, 484 U.S. 518, 528 (1988) (“it should be obvious that no one has a ‘right’ to a security clearance”). 7 484 U.S. at 531. 5 the “whole-person concept.” The administrative judge must consider all available, reliable information about the person, past and present, favorable and unfavorable, in making a decision. The protection of the national security is the paramount consideration. AG ¶ 2(b) requires that “[a]ny doubt concerning personnel being considered for national security eligibility will be resolved in favor of the national security.” Under ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Under ¶ E3.1.15, the applicant is responsible for presenting “witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by the applicant or proven by Department Counsel.” The applicant has the ultimate burden of persuasion to obtain a favorable security decision. A person who seeks access to classified information enters into a fiduciary relationship with the Government predicated upon trust and confidence. This relationship transcends normal duty hours and endures throughout off-duty hours. The Government reposes a high degree of trust and confidence in individuals to whom it grants access to classified information. Decisions include, by necessity, consideration of the possible risk the applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation of potential, rather than actual, risk of compromise of classified information. Analysis Guideline F, Financial Considerations The security concern for financial considerations is set out in AG ¶ 18: Failure to live within one's means, satisfy debts, and meet financial obligations may indicate poor self-control, lack of judgment, or unwillingness to abide by rules and regulations, all of which can raise questions about an individual's reliability, trustworthiness, and ability to protect classified or sensitive information. Financial distress can also be caused or exacerbated by, and thus can be a possible indicator of, other issues of personnel security concern such as excessive gambling, mental health conditions, substance misuse, or alcohol abuse or dependence. An individual who is financially overextended is at greater risk of having to engage in illegal or otherwise questionable acts to generate funds. Affluence that cannot be explained by known sources of income is also a security concern insofar as it may result from criminal activity, including espionage. The guideline notes several conditions that could raise security concerns under AG ¶ 19. The following are potentially applicable in this case: (a) inability to satisfy debts; 6 (c) a history of not meeting financial obligations; and (f) failure to file or fraudulently filing annual Federal state, or local tax returns or failure to pay annual Federal, state, or local income tax as required. Applicant has a long history of financial instability, which ultimately led him to file for Chapter 7 bankruptcy in 2015. He incurred tax debt when he withdrew funds from his 401k in an earlier attempt to stabilize his finances. He also failed to timely file his 2015 federal income tax return, as required. The above AGs are satisfied. Conditions that could mitigate financial considerations security concerns are provided under AG ¶ 20. The following are potentially applicable: (a) the behavior happened so long ago, was so infrequent, or occurred under such circumstances that it is unlikely to recur and does not cast doubt on the individual’s current reliability, trustworthiness, or good judgment; (b) the conditions that resulted in the financial problem were largely beyond the person’s control (e.g., loss of employment, a business downturn, unexpected medical emergency, or a death, divorce or separation, clear victimization by predatory lending practices, or identity theft), and the individual acted responsibly under the circumstances; (d) the individual initiated and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve debts; and (g) the individual has made arrangements with the appropriate tax authority to file or pay the amount owed and is in compliance with those arrangements. Applicant’s financial issues occurred, in part, due to his own poor decisions, such as an unsuccessful book deal and ill-advised investing in the stock market. However, his finances were also negatively affected by circumstances beyond his control, including his mother’s funeral expenses, and significant out-of-pocket medical expenses related to his own cancer treatment. Applicant tried in various ways to resolve his debts over several years, including debt consolidation and utilizing his own 401k savings. Ultimately, he filed Chapter 7 bankruptcy in 2015. AG ¶¶ 20(b) and 20(d) have some application. Recently, Applicant’s finances have improved, largely because his debts were discharged. Applicant’s tax debts resulted from his decision to withdraw funds from his 401k plan, and those debts have now been paid. AG ¶ 20(g) applies. Applicant failed to file his tax returns in 2015, but attributed that to an error by his tax preparer. The only SOR debts which remain are two small medical debts he attempted to resolve. 7 Applicant’s current financial situation no longer casts doubt on his reliability, trustworthiness, and good judgment. AG ¶ 20(a) applies. Whole-Person Concept Under the whole-person concept, the administrative judge must evaluate an applicant’s eligibility for a security clearance by considering the totality of the applicant’s conduct and all relevant circumstances. The administrative judge should consider the nine adjudicative process factors listed at AG ¶ 2(c): (1) the nature, extent, and seriousness of the conduct; (2) the circumstances surrounding the conduct, to include knowledgeable participation; (3) the frequency and recency of the conduct; (4) the individual’s age and maturity at the time of the conduct; (5) the extent to which participation is voluntary; (6) the presence or absence of rehabilitation and other permanent behavioral changes; (7) the motivation for the conduct; (8) the potential for pressure, coercion, exploitation, or duress; and (9) the likelihood of continuation or recurrence. Under AG ¶ 2(c), the ultimate determination of whether to grant eligibility for a security clearance must be an overall commonsense judgment based upon careful consideration of the guidelines and the whole-person concept. I considered the potentially disqualifying and mitigating conditions in light of all the facts and circumstances surrounding this case. I have incorporated my comments under Guideline F in my whole-person analysis. I credit Applicant’s long career in the defense industry as a factor weighing significantly in his favor. I also believe that Applicant recognizes the error of his past ways and is less likely to find himself in financial trouble in the future as a result. Overall, the record evidence leaves me with no questions or doubts as to Applicant’s eligibility and suitability for a security clearance. I conclude Applicant mitigated the financial considerations security concerns. Eligibility for access to classified information is granted. Formal Findings Formal findings for or against Applicant on the allegations set forth in the SOR, as required by section E3.1.25 of Enclosure 3 of the Directive, are: Paragraph 1, Guideline F: FOR APPLICANT Subparagraphs 1.a-1.f: For Applicant 8 Conclusion In light of all of the circumstances presented by the record in this case, it is clearly consistent with the interests of national security to grant Applicant eligibility for a security clearance. Eligibility for access to classified information is granted. ________________________ Braden M. Murphy Administrative Judge